Credit up 30 per cent in 2014
Both deposits and loans in Cambodia’s banking sector increased about 30 per cent last year, a rise that industry insiders say is a productivity boost for the Kingdom’s economy.
By the end of December, deposits at all Cambodian banks reached $10 billion, a 32 per cent increase from $7.5 billion at the end of 2013, according to figures from National Bank of Cambodia (NBC).
The same data showed that outstanding loans reached $9.4 billion at end of last year, up 28 per cent from 2013.
Stephen Higgins, founder and managing partner of Cambodia-based investment firm Mekong Strategic Partners, told the Post that, despite the political uncertainty that lasted well into 2014, the growth in Cambodia’s banking sector shows strengthening business confidence.
“Credit growth is very much on track to hit our expectations of $30 billion by 2020,” he said.
For the banks individual performance, Higgins added, it was unclear yet as to whether their profits would mirror the high rates of lending growth.
“It is difficult to say how this growth has flowed through to their bottom line, as interest margins have remained under pressure. Overall though, we should see healthy growth for quite a few of the banks,” he said.
The NBC’s 2014 annual report reveals at the end of 2014, the number of depositors at banks and microfinance institutions together reached 3.3 million people, an increase of 27 per cent from the year earlier. While the number of borrowers across both banks and MFIs reached $2.2 million, up 14.6 per cent year-on-year.
While lending across the financial sector was increasing at a strong rate, Chea Chanto, governor of the National Bank of Cambodia, said on Monday that this was occuring while the economy remained stable.
“Actually, the inflation rate is controllable with a low rate at 3 per cent while the value of the riel currency is stable, with an exchange rate of about 4,000 riel compared to the dollar,” he said at the NBC’s annual meeting on Monday.
But a report released this week from credit ratings agency Standard & Poor’s, rated Cambodia’s banking sector as high risk and moderately unstable, due to the sharp rise in lending, and too many banks catering for too little clients. S&P says the NBC lacks the tools to deal with underperforming banks in a time of crisis.
In Channy, chief executive officer at Acleda Bank, shrugged of any suggestion of vulnerability in the banking sector yesterday and lauded the rise in credit growth as a boon for the economy.
“I think it is a good move, not a worry at all,” he said. “We want the public to use financial services from banks and MFIs as much as possible, especially using deposit savings because we want to get the balance right to generate loans for others who need them to develop their business,” he said.